Panic struck now-fourth largest cryptocurrency XRP on December 23, as U.S. authorities finally filed a lawsuit over token sales worth $1.3 billion.
XRP was down by one third over 24 hours at press time. Having retaken its position as the No. 3 cryptocurrency by market capitalization from stablecoin Tether (USDT) following a November rally, XRP dropped back to fourth place today, according to CoinMarketCap
In a press release issued on Tuesday, the U.S. Securities and Exchange Commission (SEC) struck fear into XRP traders by alleging that the cryptocurrency is a security.
Bitcoin also appears to have been affected by the market turmoil, with heavy volatility causing it to drop and then bounce by more than $1,000 over four hours early this morning.
XRP dips as SEC names Ripple execs in lawsuit
The result of an investigation that has lasted several years, the SEC’s lawsuit, if successful, could shut down XRP trading in the U.S. as American cryptocurrency exchanges are not permitted to trade securities without a broker-dealer license.
Notionally the company behind XRP, as well as its largest owner, Ripple has consistently stirred controversy by claiming that despite controlling and selling off large numbers of tokens, it is not behind XRP.
The SEC, however, now seems more than satisfied about Ripple’s role in distributing $1.3 billion worth of XRP to investors. It also cited Ripple Executive Chairman Chris Larsen and CEO Brad Garlinghouse for personally selling a combined $600 million in XRP.
“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” the release quotes Stephanie Avakian, director of the SEC’s Enforcement Division, as saying.
Responding, Garlinghouse accused the SEC of launching an “attack” on the cryptocurrency industry as a whole, and not just targeting Ripple in particular.
“The SEC is doing the opposite of ‘fostering innovation’ here in the US,” he wrote as part of a Twitter discourse. “It’s not just XRP they’re attacking here.”
Ripple has claimed that XRP is a currency, not a security, citing a 2015 settlement with the Department of Justice and Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
Garlinghouse’s words, along with a vehement reaction from Ripple itself, were not enough to reassure nervous markets, however, as XRP/USD slid by 33% in 24 hours to drop below $0.34.
Considering trading opportunities, meanwhile, Michaël van de Poppe highlighted the areas around $0.45 and $0.30, the latter forming XRP’s current zone, as potential buyer support.
“Lower timeframe, we have seen that there’s a lower extension downwards,” he noted in analysis on Wednesday. But he also predicted an XRP bounce back:
“So are we going to $0.40? Would not be unlikely given the (transaction analysis), but given the (fundamental analysis), I would not be touching XRP too much at this point.”
BTC price in heavy volatility
Bitcoin itself saw rapid losses on Wednesday despite news of fresh institutional buy-ins worth $285 million. While not definitively attributable to the XRP debacle, concerns about a regulatory crackdown on cryptocurrency traders in the U.S. had already been growing thanks to last-minute efforts from Treasury Secretary Steven Mnuchin to regulate privately held crypto wallets.
Aiming to monitor private wallets more closely and require exchanges to collect “know-your-customer” data from them for any transaction of more than $3,000, Mnuchin’s proposals immediately saw kickback from various parties.
“I guarantee this… Mnuchin’s next job will be at a #Bitcoin exchange working as a lobbyist to block any stupid regulatory non-starters in DC. He’ll be paid in Bitcoin,” RT host Max Keiser even claimed.
At press time, BTC/USD traded at near $23,700 amid intense volatility. A dive of $1,000 in under an hour to $22,800 earlier in the day saw a strong bounce, with $24,000 selling pressure still in place.